The crypto market has been moving in the red during today’s trading session with Bitcoin and Ethereum surrendering the past week’s gains. The first cryptocurrency by market capitalization seems to be reacting to the Federal Open Market Committee (FOME) meeting set for tomorrow.
During this event, the U.S. Federal Reserve (Fed) is expected to potentially announce an increase in interest rates. Projection aimed at a 75 basis points (bps) hike, but the financial institution might surprise the market with a 100 bps in an attempt to cut down inflation.
The Consumer Price Index (CPI), a metric used to measure inflation in the U.S. dollar, stands at a 40-year-old high. This has forced the Fed to shift its monetary policy by hiking interest rates, reducing its balance sheet, and removing liquidity from global markets.
As a consequence, Bitcoin and the crypto market have been trending to the downside. The benchmark crypto saw a period of relative stability when it was able to stabilize at around $20,000, BTC’s price current level.
The altcoins sector was less fortunate as Ethereum (ETH), Cardano (ADA), Solana (SOL), and other major cryptocurrencies broke below critical resistance. Some altcoins return to their 2020 levels as Bitcoin dominance trended to the upside.
This is an indication of uncertainty and risk-off sentiment in the crypto market. The metric saw a decline over the past two weeks on the back of expectations of mitigating inflation, supported by a drop in the price of commodities, and the announcement of a date for the Ethereum “Merge”.
Data from Arcane Research supports the above as the research firm records a decrease in performance for their Large, Mid, and Small Cap Index. As seen below, these indexes have been recording heavier losses than Bitcoin as BTC Dominance picks up bullish momentum.
Bitcoin Dominance Spike Hints At Crypto Market Uncertainty
Arcane Research noted that the overall weakness in the sector is driven by a “natural rotation as traders seek safety in a falling market”. The increase in Bitcoin dominance has been accompanied by a rise in stablecoin total market share.
In other words, market participants are buying Bitcoin and stablecoins to protect them from potential downside risks. The report stated:
Ether’s lack of strength relative to bitcoin has caused its market dominance to fall 0.34% over the last week. On the other hand, Bitcoin has seen its market share increase by 0.47%. This is a natural rotation as market fall, given that investors perceive bitcoin as a lower-risk asset than ether.
Tomorrow’s FOMC meeting will decide the short-term fate of BTC dominance and the fate of larger cryptocurrencies.
Image and article originally from www.newsbtc.com. Read the original article here.